A measure to ban non-doms - who do not pay UK tax on overseas earnings - from sitting in Parliament was inserted into the Constitutional Reform and Governance Bill with cross-party support.

'Will be qualifying'

The New Statesman reports Lord Paul as saying: "On the issue of taxation position of peers, of course it goes without saying that I'll be fully complying with the change of law which the government is bringing forward.

"I strongly support the government proposals in relation to the taxation status of peers and MPs and the membership of the House of Lords and the House of Commons."

He later told the Press Association: "I will be paying all the taxes. I will be qualifying to be in the House of Lords."

Indian-born steel magnate Lord Paul was ennobled in 1996 and appointed to the Privy Council last year.

Scotland Yard began examining his expenses at the end of last year, following allegations that he had nominated an Oxfordshire flat he had never stayed in as his main home, allowing him to claim tens of thousands of pounds for his London property.

Investigation

Lord Paul said the Metropolitan Police had told him he would not face any further action over allegations that he abused parliamentary expenses.

The Sub-Committee on Lords' Interests has now launched an investigation into Lord Paul's expenses arrangements, its spokesman said.

The process had been on hold while the police carried out their inquiries.

Last week, Conservative deputy chairman and major donor Lord Ashcroft revealed that he had remained a non-dom, despite pledging to become a "permanent resident" when he was awarded a peerage 10 years ago.

Lord Paul, who was recently made a privy councillor, has insisted it was "ridiculous" to compare his situation because he has always been open about his tax status.

Lord Ashcroft has said he accepts the forthcoming change to the rules on non-doms sitting in Parliament.

In a statement last week, the Tory peer said: "While the non-dom status will continue for many people in business or public life, David Cameron has said that anyone sitting in the legislature - Lords or Commons - must be treated as resident and domiciled in the UK for tax purposes. I agree with this change and expect to be sitting in the House of Lords for many years to come."

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